[Congressional Record (Bound Edition), Volume 162 (2016), Part 1]
[House]
[Pages 1270-1284]
[From the U.S. Government Publishing Office, www.gpo.gov]




               ENCOURAGING EMPLOYEE OWNERSHIP ACT OF 2015


                             general leave

  Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks and submit extraneous materials on the bill, H.R. 1675, to 
direct the Securities and Exchange Commission to revise its rules so as 
to increase the threshold amount for requiring issuers to provide 
certain disclosures relating to compensatory benefit plans.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  The SPEAKER pro tempore. Pursuant to House Resolution 595 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the state of the Union for the consideration of the bill, H.R. 1675.
  The Chair appoints the gentleman from Pennsylvania (Mr. Thompson) to 
preside over the Committee of the Whole.

                              {time}  1402


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the state of the Union for the consideration of the bill 
(H.R. 1675) to direct the Securities and Exchange Commission to revise 
its rules so as to increase the threshold amount for requiring issuers 
to provide certain disclosures relating to compensatory benefit plans, 
with Mr. Thompson of Pennsylvania in the chair.
  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the rule, the bill is considered read the 
first time.
  The gentleman from Texas (Mr. Hensarling) and the gentlewoman from 
California (Ms. Maxine Waters) each will control 30 minutes.
  The Chair recognizes the gentleman from Texas.
  Mr. HENSARLING. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, I rise in strong support of H.R. 1675, the Encouraging 
Employee Ownership Act.
  I do this because, as you know, Mr. Chairman, regrettably, we saw 
that in the last quarter this economy grew at a paltry seven-tenths of 
1 percent. On an annualized basis, this economy is limping along at 
roughly half the normal growth rate.
  That means that this economy is not working for working families, who 
under 8 years of Obamanomics have found themselves with smaller 
paychecks and smaller bank accounts and greater anxiety about how are 
they going to make their mortgage payments, how are they going to make 
their car payments, are they going to be able to save enough to send 
somebody to college.
  This economy is still underperforming for American families. So it is 
critical that we help our small businesses, which are truly the job 
engine in our economy, Mr. Chairman, as you well know.
  I want to commend the sponsors of the five bills that make up H.R. 
1675, Representatives Hultgren, Hill, Huizenga, and Hurt. Their work 
has resulted in a bipartisan bill that we think will help create a 
healthier economy.
  Again, we know that 60 percent of the Nation's new jobs over the past 
couple decades have come from our small businesses. If we are going to 
have a healthier economy that offers more opportunity, we have to offer 
more opportunities for small business growth and

[[Page 1271]]

small business startups. We have to ensure that they have capital and 
the credit they need to grow. You can't have capitalism without 
capital, Mr. Chairman.
  Yet, we have heard from countless witnesses in our committee--from 
community banks to credit unions, the primary source of small business 
loans--that they are drowning, drowning in a sea of complex, 
complicated, expensive regulations, many of them emanating from the 
Dodd-Frank Act, which is causing a huge burden on the economy and 
working families.
  The same is true of many of our burdensome security regulations as 
well. Many of them are well intentioned, but, Mr. Chairman, they were 
written with our largest public companies in mind, but they end up 
hurting our smaller companies. It is time that we help level that 
playing field for small businesses with smarter regulations that will 
still maintain our fair and efficient markets, protect investors, but 
allow small competitors the chance to succeed. We make some progress 
today on this bipartisan bill, H.R. 1675.
  Now, it is a modest bill, Mr. Chairman. It is only 20 pages long--
anybody can read it--but it provides many overdue improvements that 
will help spur capital formation, and the legislation gives companies 
options and choices on how to best attract investment and capital. In a 
free society, isn't that where we should be?
  It updates rules to allow small businesses to better compensate their 
employees with ownership in the business. Let them have a piece of the 
American Dream. In so doing, it strengthens provisions enacted into law 
in the bipartisan JOBS Act and the FAST Act to give employees a greater 
opportunity to share in the success of their employer.
  It codifies no action relief issued by the SEC to remove regulatory 
burdens for individuals who assist with the transfer of ownership of 
small- and mid-sized privately held companies.
  It will provide investors with more research on exchange-traded 
funds, or ETFs, by extending a liability safe harbor consistent with 
other securities offerings.
  It provides a voluntary, Mr. Chairman--I repeat voluntary--exemption 
from reporting in XBRL data format for emerging growth companies and 
smaller public companies, the cost and use of which have continually 
been questioned in our committee.
  The committee received testimony from a biotechnology executive who 
said that outreach to his analyst investors yielded a consensus 
response that they weren't even aware of XBRL, but the witness went on 
to say that his company is having to spend $50,000 annually in 
compliance costs that obviously could have been better spent in 
productivity and job creation.
  Finally, it requires the SEC to conduct a retrospective review every 
10 years to update or eliminate outdated, unnecessary, and duplicative 
regulations. This is also known, Mr. Chairman, as common sense. The 
administration claims that this provision is duplicative because the 
SEC is already encouraged to review their regulations. Well, 
encouragement doesn't quite get the job done. We need to ensure that 
these regulations are looked at and at least looked at on an every-
decade basis.
  You will hear some say that, well, the SEC's resources are stretched 
too thin. I am happy to go back and amend Dodd-Frank so that they have 
more resources to devote to capital formation. By the way, they just 
got a big, fat raise in the latest omnibus. Mr. Chairman, I don't think 
that argument holds much water.
  By enacting H.R. 1675, we are going to ease the burdens on small 
businesses and job creators. Isn't that what we ought to be about? We 
will help foster capital formation so that Americans can go back to 
work, have better careers, pay their mortgages, pay their healthcare 
premiums, and ultimately give their families a better life.
  I urge my colleagues to join me in supporting H.R. 1675.
  Mr. Chairman, I reserve the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such 
time as I may consume.
  Mr. Chairman, I rise today in strong opposition to H.R. 1675. It is 
really a package of five bills which will harm investors and, 
perversely, the very small businesses Republicans say they want to 
help. It does so by ignoring and supplanting the good judgment of the 
Securities and Exchange Commission, which has already sought to provide 
small businesses with regulatory relief in these same areas while also 
ensuring that investors in those businesses have the protections they 
deserve.
  The SEC's balanced approach makes sense as investors who are not 
confident in the integrity of our markets will simply not invest, which 
means that job-creating companies will not have the capital they need 
to grow. In particular, this bill would reduce corporate transparency 
for employee stockholders by allowing private companies to compensate 
their employees with up to $10 million in stock every year without 
having to provide them with relatively simple disclosures about the 
financials of the company or the risk associated with these securities.
  Mr. Chairman and Members, I am not going to attempt to hide the facts 
of this bill with a lot of rhetoric. The fact of the matter is, if 
employees are being given stock up to $10 million that they don't know 
the value of, and the companies don't have to disclose anything about 
the stock, they could end up with worthless stock, not worth anything, 
where they had great expectations that somehow in lieu of raises and 
more money that they probably deserve, they are being given rotten 
stock.
  This provision would double the current disclosure threshold, 
allowing larger companies with at least $34 million in total assets to 
encourage overinvestment by employees in a company that they cannot 
value and that may never permit them to sell except back to the company 
at a price set by the company. That is another aspect of this.
  This type of deregulation invites more Enron-type fraud into the 
market. Remember Enron? I hope we have not forgotten it already and 
what happened to those employees. Sometimes you had two members of the 
family, the husband and the wife, who both had this bad stock that they 
couldn't sell back, they couldn't do anything with, where employees 
have to trust the accounting of their companies but instead are left 
with valueless stock.
  Similarly, this bill would exempt over 60 percent of public companies 
from using a computer-readable format known as XBRL in their SEC 
filings. Exempting such a large number of filers would prevent these 
companies from being easily compared to other companies that use XBRL, 
to the disadvantage of analysts, researchers and the SEC, investors, 
and even the companies themselves.
  Basically, what you are doing is saying, we are going to have a bill 
here that would prevent the kind of information that analysts and 
researchers, the SEC and investors should have, comparing them with 
other companies because somehow we want to protect those who don't want 
people to really know what their worth is.
  This is very serious stuff. According to the SEC's Investor Advocate, 
this exemption seriously impedes the ability of the SEC to bring 
disclosure into the 21st century. That is their quote.
  Title III of the bill further supplants the SEC's good judgment by 
significantly expanding the Commission's recently provided relief for 
certain mergers and acquisition brokers without imposing eight 
important investor protections granted by the SEC. As a result, bad 
actors who may have committed fraud and shell companies could use this 
relief and brokers wouldn't have to make basic disclosures about their 
conflict of interest.
  In committee markup, Democrats attempted to close these loopholes, 
but our efforts were rejected in a party-line vote.
  Can you imagine that the SEC has taken a big step, and they have 
listened to concerns, they have listened to complaints, and they have 
gone overboard to make sure that they were

[[Page 1272]]

providing relief for certain kinds of mergers and acquisitions.

                              {time}  1415

  What this bill would do is take away the ability of the SEC to have 
investor protections that they have already been granted.
  So again, this bill, which includes five bills all designed, 
basically, to disregard the investors, disregard the small-business 
people, disregard the average American citizen, is a bill that would 
simply go in the wrong direction, helping the corporations who would 
simply not want to disclose and not want to be seen for what they are.
  Title II also fails to sufficiently protect investors, as it 
eliminates offering liability for brokers who, under the guise of 
providing exchange-traded funds, or ETFs, could selectively use data to 
promote and sell highly risky, complex, and little-known ETFs to 
unsuspecting investors.
  Finally, the bill seeks to impose additional regulatory burdens on 
the SEC by requiring it to conduct a duplicative and more onerous 
retrospective review of its rules.
  Specifically, title V would require the SEC to, within 5 years of 
enactment, review and revise all of its rules, which I should mention 
date back to 1934. It would also allow the SEC to override 
congressional mandates, including those in the Dodd-Frank Wall Street 
reform bill.
  Republicans on the Financial Services Committee are always claiming 
that the SEC is unresponsive to Congress, yet this provision in the 
bill would allow the Commission to unilaterally repeal the will of 
Congress at their whim. Indeed, this title is a thinly veiled 
Republican attempt to impose cost-benefit type analyses on our 
regulators as a means of eliminating rules designed to benefit the 
public and protect investors.
  H.R. 1675 is an anti-investor bill that will reduce transparency, 
establish additional administrative burdens on the SEC, and create 
easily exploited loopholes for bad actors.
  It is well known that Members on the opposite side of the aisle do 
not like our ``cop on the block,'' which is the SEC. While they talk 
about what the SEC will, can, or will not do, they simply try and 
strangle it by being opposed to them having the adequate funding that 
they need in order to do their job.
  So, when we hear today, for example, as the chairman said, that he 
would be willing to support some funding for the SEC, it is very 
important that they put their money where their mouths are and make 
sure that the SEC has the money to do its job.
  In conclusion, this bill goes in the wrong direction. It is 
unfortunate that, at a time when we have gone through a recession based 
on 2008 and the unwillingness or the inability for our regulatory 
agencies to watch over our investors and to watch over our average 
small-business people and homeowners, et cetera, and while we are 
trying desperately to clean up this mess with Dodd-Frank reforms, we 
would come in here at this time, having experienced all of this, with a 
bill like this that would try and protect the worst actors in the 
financial services industry.
  I urge my colleagues to oppose H.R. 1675.
  Mr. Chairman, I reserve the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I yield 4 minutes to the gentleman from 
Illinois (Mr. Hultgren), a workhorse on our committee and the chief 
sponsor of H.R. 1675, to bring more jobs to the American people.
  Mr. HULTGREN. I thank Chairman Hensarling for his great work on the 
Financial Services Committee, and I specifically want to thank him for 
his help on this bill coming to the floor today.
  Mr. Chair, today I am very proud to speak in support of the Capital 
Markets Improvement Act. The bill includes a number of important titles 
that my colleagues on the House Financial Services Committee, 
Republicans and Democrats, are confident will improve our capital 
markets, whether it is reducing regulatory requirements for emerging 
growth companies subject to redundant reporting requirements to the SEC 
or making it easier for investors to have access to investment reports 
on exchange-traded funds.
  This bill also includes a title I worked on diligently with Mr. 
Delaney to make it easier for companies in Illinois and nationwide to 
let hardworking employees own a stake in the business they are part of.
  The Illinois Biotechnology Industry Organization, which represents 
companies that employ thousands of residents in my district and 
throughout Illinois, believes that making it easier for companies to 
offer employee ownership helps Illinois businesses expand and hire more 
workers.
  Warren Ribley, the president and CEO of iBIO, has stated:

       As someone who has worked in economic development for most 
     of my career, I know that offering an ownership stake to 
     employees is a critical tool in recruiting top talent to job-
     generating companies. And there is no doubt that an equity 
     stake encourages employees to drive hard for success of the 
     enterprise.
       EEOA promises to aid in job creation in Illinois' growing 
     technology sector, especially for the many early-stage 
     companies with whom we assist along their commercialization 
     path.

  Unfortunately, some companies are shying away from offering employee 
ownership because of regulations that limit how much ownership they can 
safely offer.
  SEC rule 701 mandates various disclosures for privately held 
companies that sell more than $5 million worth of securities for 
employee compensation over a 12-month period. In 1999, the SEC 
arbitrarily set this threshold at $5 million without a concrete 
explanation for why investors would face difficulties with sales above 
this number.
  For businesses who want to offer more stock to more employees, this 
rule forces those businesses to make confidential disclosures that 
could greatly damage future innovations if they fell into the wrong 
hands. This required information includes business-sensitive 
information, including the financials and corresponding materials like 
future plans and capital expenditures.
  The SEC originally acknowledged this, and some voiced their concern 
that a disgruntled employee could use this confidential information to 
harm their former employer. Leaving aside the risk involved in 
disclosing this confidential information, it is costly to prepare these 
disclosures just so a business can offer the benefits of ownership to 
their employees.
  My bill is simple. It is a simple, bipartisan fix that changes that. 
EEOA amends SEC rule 701 to raise the disclosure threshold from $5 
million to $10 million and adjust the threshold for inflation every 5 
years.
  To be clear, issuers that are exempt from disclosure would still have 
to comply with all pertinent antifraud and civil liability 
requirements. The employees purchasing these securities go to their 
business every day and already have a good sense of how their company 
is operating.
  Support for this effort to improve the utility of rule 701 can 
actually be found in the SEC's own Government-Business Forum on Small 
Business Capital Formation Final Reports for 2001, 2004-2005, and 2013.
  As the Chamber of Commerce has explained, this legislation would 
``help give employees of American businesses a greater chance to 
participate in the success of their company.'' Increasing this 
threshold, they explain, would ``ensure that rule 701 remains a viable 
provision for businesses to use in the future'' and ``decrease the 
likelihood of unnecessary regulatory requirements.''
  There is no evidence to suggest that rule 701 is not working for 
companies and their employees, and we have every reason to make this 
option available to more Americans with the desire to build their 
wealth through their company's success.
  Finally, I want to underscore how important it is that the Capital 
Markets Improvement Act pass with a strong bipartisan vote, just like 
each title passed in the Financial Services Committee under Chairman 
Hensarling's leadership.
  My bill, the Encouraging Employee Ownership Act, had a bipartisan 
vote of

[[Page 1273]]

45-15 in committee. Mr. Hill's bill, making investment reports on ETFs 
more accessible, had a vote of 48-9. Mr. Huizenga's bill, creating a 
simplified SEC registration system for M&A brokers, had a vote of 36-
24. Mr. Hurt's bill, allowing an optional exemption for emerging growth 
companies for SEC reporting requirement, had a vote of 44-11. Also, Mr. 
Hurt's bill, requiring the SEC to retroactively review regulations, had 
a 46-16 vote.
  I urge all my colleagues to vote in support of the Capital Markets 
Improvement Act of 2016.
  Ms. MAXINE WATERS of California. I yield 3 minutes to the gentlewoman 
from Ohio, (Mrs. Beatty), a member of the Financial Services Committee.
  Mrs. BEATTY. Mr. Chairman, I think it is simple today. We have heard 
Congresswoman Maxine Waters outline our position for this.
  Let me just say that this bill is flawed, overly broad, avoids 
appropriate oversight, duplicative of existing administrative 
authorities, and could be wasteful and costly. I join Ms. Maxine Waters 
of California today in opposition to H.R. 1675, a package of capital 
market deregulatory bills that undermine the Security and Exchange 
Commission's effective oversight of capital markets and places the GOP 
special interests ahead of those hardworking Americans whom we are here 
to serve.
  Secondly, the package also excludes exemptions from certain investor 
disclosures and SEC filing requirements and a safe harbor from certain 
broker-dealer liabilities, all without commensurate investor 
protections.
  A key component of this package is title V, H.R. 2354, which is an 
unnecessary, burdensome, and unfunded mandate requiring a full-scale 
review designed to hamstring the SEC's ability to perform basic 
oversight of the financial markets.
  Title III of the package exempts small business merger and 
acquisition brokers from registering as a broker-dealer with the SEC.
  Mr. Chairman, let me sum it up by saying that the bad outweighs the 
good in this bill. I stand in opposition to it.
  Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from 
California (Mr. Royce), a valued member of the Financial Services 
Committee and chairman of the House Foreign Affairs Committee.
  Mr. ROYCE. Mr. Chairman, the reason this legislation is on the floor, 
frankly, is because of the anemic economic growth that the United 
States is facing. We have got less than 2 percent economic growth. If 
we are going to figure out a way to get the economic engine running 
again, we have got to do something to remove the barriers to access to 
capital. That is what the Capital Markets Improvement Act attempts to 
do here. H.R. 2354, the Streamlining Excessive and Costly Regulations 
Review Act, does just that.
  Let's face it, regulators aren't perfect. They are like lawmakers in 
that sense. Regulators have a certain obligation to examine their 
record to determine failures and to rectify missteps as needed.
  The Streamlining Excessive and Costly Regulations Review Act will 
give the Securities and Exchange Commission the opportunity to do so. 
It would set that up on an ongoing basis. It requires a retrospective 
Commission review of rules and regulations that have an annual economic 
impact or cost of $100 million or more, result in a major increase of 
costs or prices for consumers, or harm the ability of U.S. enterprises 
to compete against foreign competitors.
  Commissioners will be able to reverse ineffective, insufficient, or 
excessively burdensome regulations with the guidance of public notice 
and comment, and it ensures that the SEC isn't simply rolling out the 
red tape in a vacuum, oblivious to the negative economic impact that 
their actions have on consumers, investors, or businesses.
  The success of a regulation or rulemaking shouldn't be measured in 
quantity. Instead, we need smart guidelines to protect our economy and 
preserve the world's strongest capital markets here in the United 
States.
  Mr. Chairman, I thank the author of this bill, Mr. Hurt of Virginia, 
for his leadership on this issue, and I urge my colleagues to join me 
in supporting this.
  Ms. MAXINE WATERS of California. Mr. Chairman, I yield 3 minutes to 
the gentleman from Massachusetts (Mr. Lynch), the ranking member of the 
Task Force to Investigate Terrorism Financing on the Financial Services 
Committee.

                              {time}  1430

  Mr. LYNCH. Mr. Chairman, I thank the gentlewoman for yielding.
  It is very rare that I get to speak in opposition to such bad 
legislation, but not only do we have a single bill that is bad 
legislation, my friends across the aisle have packaged five bad bills 
and put them all together. My only regret is that I only have 3 minutes 
to speak about these bills.
  Let me single one out, the Encouraging Employee Ownership Act of 
2015. Currently, employee benefit plans must disclose information to 
employees who invest in those plans if the plan's assets are above $5 
million.
  H.R. 1675, the Encouraging Employee Ownership Act of 2015, now 2016, 
modifies SEC rule 701 by allowing private companies to compensate their 
employees up to $10 million, indexed for inflation.
  So they can pay their employees in stock, basically. But the key here 
is that they don't have to provide the same information that they would 
to outside investors in that same stock. Therein lies the danger here.
  This means that employees in smaller companies, start-ups, 
especially--small drug companies, small software companies--those 
employees with smaller plans, oftentimes those companies are more 
subject to, more vulnerable to, the ups and downs of the economy. These 
are the most vulnerable.
  So the employees in those small plans that are paid with company 
stock would be less protected as to how their stocks are performing.
  Last Congress I voted against a similar bill, H.R. 4571, when it was 
marked up in our committee. I also spoke in opposition to this bill 
when it was included as title XI of H.R. 37.
  This bill uses the veneer of job creation to provide special 
treatment for well-connected corporations, mergers and acquisition 
advisers, and financial institutions, while doing very little for and 
probably doing much damage to employees and working families.
  I strongly support employees receiving equity. I think that is a good 
deal. If employees can receive stock options and, importantly, if they 
can know about the value of those stocks and know about the condition 
of these companies, that can be a huge advantage.
  Employees will buy into the company, but they have to have the 
information about what the stock is worth. This bill allows them to be 
denied that information. They are buying a pig in a poke. They don't 
know what the stocks are worth. So it puts them at a tremendous 
disadvantage.
  And, again, these companies are the ones that are most vulnerable to 
ups and downs in the economy going forward.
  I agree the remarks of Professor Theresa Gabaldon from George 
Washington University during our April 29 Capital Markets and 
Government Sponsored Enterprises Subcommittee hearing. During her 
testimony, the professor expressed opposition to this bill for the very 
reasons I have stated.
  The CHAIR. The time of the gentleman has expired.
  Ms. MAXINE WATERS of California. I yield another 30 seconds to the 
gentleman.
  Mr. LYNCH. She opposed this bill because employees deserve the same 
protections, she said, as investors.
  This makes sense. This is easy. We should be able to do what we want 
to do here and stimulate the economy, yet, at the same time, allow 
these employees to have the information that they need to know what the 
value of the stocks they are being paid with are worth. It is as simple 
as that.
  I thank the ranking member for her indulgence.
  Mr. HENSARLING. Mr. Chair, I yield myself 10 seconds to remind my 
friends

[[Page 1274]]

who have spoken that title I of this bill passed 45-15, with Democratic 
support; title II, 48-9, with Democratic support; title III, in the 
last Congress, passed the floor 420-0; title IV, 44-11, with Democratic 
support; title V, 41-16, with Democratic support. So perhaps they 
should discuss these attacks amongst themselves first.
  I yield 6 minutes to the gentleman from Virginia (Mr. Hurt), one of 
the prime sponsors and author of title IV and title V.
  Mr. HURT of Virginia. Mr. Chairman, I thank the chairman of the 
Financial Services Committee for his leadership in moving this 
legislation to the floor.
  I rise today in support of this bill, the Capital Markets Improvement 
Act.
  As I travel across Virginia's Fifth District, the number one issue 
facing the families I represent is the desperate need for job creation.
  Making sure that hardworking Virginians and Americans have adequate 
access to capital markets is imperative to job creation and to 
sustained economic growth for our great Nation.
  This is why it is so important that the Financial Services Committee 
and the House of Representatives continue to push legislation that will 
make it easier for our businesses, for our farmers, and for families to 
be successful.
  Indeed, every provision within this bill today we are considering has 
received bipartisan support, and each title of this bill is critical to 
enhancing access to capital and ensuring that the U.S. capital markets 
remain the most vibrant in the world.
  Within this Capital Markets Improvement Act, I am pleased that two 
provisions that I have sponsored have been included, the Small Company 
Disclosure Simplification Act and the Streamlining Excessive and Costly 
Regulations Review Act.
  The first provision is contained in title IV. The Small Company 
Disclosure Simplification Act addresses a 2009 mandate from the SEC 
which required the use of eXtensible Business Reporting Language, or 
XBRL, for public companies.
  While the SEC's rule is well-intended, this requirement has become 
another example of a regulation where the costs often outweigh the 
potential benefits.
  These companies spend thousands of dollars and more complying with 
the regulation, yet there is little evidence that investors actually 
use XBRL, leading one to question its real-world benefits.
  The provision before us today is a measured step that would offer 
small companies relief from the burdens of XBRL. Title IV provides a 
voluntary--let me say that again--a voluntary exemption for emerging 
growth companies and smaller public companies from the SEC's 
requirements to file their financial statements via XBRL in addition to 
their regular filings with the SEC.
  It is important to note that nothing in this bill precludes companies 
from utilizing XBRL for their filings with the SEC. The exemption is 
completely optional and allows smaller companies to assess whether the 
costs incurred for compliance are outweighed by any benefits using this 
technology.
  During our committee's hearing on this issue, one company reported 
that it spent $50,000 on complying with XBRL. That is a real cost to a 
small company, especially when that cost does not yield a significant 
benefit.
  I am not suggesting that every firm pays this much, but certainly we 
can agree that, when filing fees are this high, we should ensure that 
the requirements result in a benefit to investors and to those public 
companies being regulated.
  It is also very important to note that, with this legislation, all 
public companies will continue to file quarterly and annual statements 
with the SEC.
  Furthermore, this bill will not kill the implementation of XBRL or 
structured data at the SEC. It is merely providing a temporary and 
voluntarily exemption for smaller companies so that they may better 
utilize their capital.
  It is about choice and ensuring that these companies can use their 
capital to create jobs instead of using it to comply with unnecessary 
red tape.
  This bill has previously received strong bipartisan support in the 
Financial Services Committee and on the floor of this House when this 
measure was part of the Promoting Job Creation and Reducing Small 
Business Burdens Act.
  Similarly, during the last Congress, this measure was also approved 
with a strong bipartisan vote in the House. I ask that my colleagues 
once again support this commonsense legislation today.
  In addition to the disclosure simplification issues, we have also 
sponsored title V of this Capital Markets Improvement Act. This is a 
bipartisan bill that I crafted with my colleague, Ms. Kyrsten Sinema of 
Arizona.
  The Streamlining Excessive and Costly Regulations Review Act is about 
accountable and representative government and making sure that the SEC 
is taking an ongoing retrospective look at its regulation.
  This legislation would simply require the SEC to review its major 
rules and regulations on a regular basis to determine whether they are 
still effective or outdated or whether they need to be changed in some 
regard. In fact, other prudential regulators, such as the FDIC, the 
OCC, and the Federal Reserve, are already doing this.
  During the mid-1990s, the Economic Growth and Regulatory Paperwork 
Reduction Act, or EGRPRA, required these entities to conduct a 
retrospective review of all of their regulations to determine if they 
were still effective and, subsequently, report their findings to 
Congress.
  Because the House Banking Committee at the time did not have 
jurisdiction over the SEC, the SEC was left out of this process.
  Title V would simply require the SEC to retrospectively review its 
regulations with the goal of ensuring that they are effective and up to 
date. It would enable the SEC to operate in the most effective manner 
possible. It would afford the SEC the autonomy and flexibility to make 
this mandate effective.
  President Obama himself endorsed this idea in multiple 2011 executive 
orders, and the other prudential regulators are already operating under 
a similar review process. This legislation simply puts the SEC on the 
same playing field as the other regulators.
  Moreover, this bill provides Congress with the insight it needs to 
hold the Commission accountable, and the legislation adheres to the 
requirements of the Administrative Procedure Act.
  All said, the structure and the process of title V will provide 
industry, the SEC, and Congress, with the structure and time necessary 
to ensure that this retrospective review process is effective.
  I ask my colleagues to join me in supporting this title so that we 
can continue to improve the SEC's regulatory regime.
  In closing, let me again thank the committee chairman, Chairman 
Hensarling, and Chairman Garrett, who is our Capital Markets and 
Government Sponsored Enterprises Subcommittee chair, for making these 
two provisions a part of this act. I urge my colleagues to vote ``yes'' 
on this good bill.
  Ms. MAXINE WATERS of California. Mr. Chairman, I yield 3 minutes to 
the gentlewoman from New York (Mrs. Carolyn B. Maloney), the ranking 
member of the Subcommittee on Capital Markets and Government Sponsored 
Enterprises of the Financial Services Committee.
  Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I thank the 
ranking member for yielding and for her leadership on this committee 
and on this legislation.
  I rise today in opposition to H.R. 1675. It would curtail the 
existing regulatory structure protecting investors.
  While this package includes bills that I have supported, including 
the ETF research bill, which simply allows more research on a fast-
growing market, ultimately, I have to oppose this package because it 
would roll back the progress that we have made in many areas, including 
on XBRL.
  I rise in opposition to the prior speaker from the great State of 
Virginia, really, one of my favorite Republicans to work with on the 
committee,

[[Page 1275]]

but I oppose very much his bill that would roll back XBRL and would 
allow roughly 60 percent of all public companies to opt out of the 
requirement to use XBRL.
  I believe that this would hurt the overall economy, the liquidity of 
the markets, and the information that investors are able to gain and 
gather.
  I am a big supporter of XBRL, which allows companies to file their 
financial statements in a computer-readable format. XBRL makes it 
possible for investors and analysts to quickly download standardized 
financial statements for an entire industry directly to a spreadsheet 
and immediately start making cross-company comparisons in order to 
identify the best performers.
  I would argue that this would increase the amount of investment in 
start-ups and small businesses. This would enable investors to more 
easily identify the companies that are diamonds in the rough, so to 
speak; and very often, these are small companies that have innovative 
business models but have trouble attracting the attention of analysts 
and institutional investors.
  One reason is it is simply too time-consuming for analysts and 
investors to pick through every small company's 100-page financial 
filings.
  A small company's filings may tell an incredible story about why that 
company is poised to be the next Apple or Google. But if the so-called 
search costs are high enough that analysts and investors never see 
them, then that company will never get the capital infusion it needs to 
grow and our economy will never realize the benefits that the company 
has to offer.
  This is where XBRL comes in. It dramatically reduces the search costs 
by making it fast and cheap for investors to gather standardized 
financial statements for entire industries, including the small 
businesses that the investors wouldn't have bothered with before.
  So if you want to improve small companies' access to capital, rolling 
back XBRL is the last thing you would want to do. I believe that we 
should be moving forward, not backward, on XBRL.
  We are already far behind the rest of the developed world in using 
structured data. I rise in opposition to this bill.
  The Acting CHAIR. The time of the gentlewoman has expired.
  Ms. MAXINE WATERS of California. I yield the gentlewoman an 
additional 1 minute.
  Mrs. CAROLYN B. MALONEY of New York. I think we should think very 
hard about an issue before we take away a tool that literally benefits 
both investors and small companies.

                              {time}  1445

  Unfortunately, that is what this bill would do. Instead of moving 
forward on XBRL and making it even more useful for analysts and 
investors, the bill would allow roughly 60 percent of all public 
companies to opt out of their requirements to use XBRL. This would 
effectively take our capital markets back to the 20th century.
  Mr. Chairman, I urge my colleagues to oppose this bill which doesn't 
benefit investors and I would say the overall economy.
  I urge a ``no'' vote from my colleagues.
  Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from 
Michigan (Mr. Huizenga), the chairman of the Monetary Policy and Trade 
Subcommittee of the Financial Services Committee and the author of 
title III of this act.
  Mr. HUIZENGA of Michigan. Mr. Chairman, I rise today to alert the 
American people: we have a red herring alert. This is a legislative 
equivalent to an Amber Alert because we have folks who talk a good game 
behind closed doors, who come out here, though, in the light of day and 
do something very different, and they are missing. They are missing in 
action from solving the problem. This red herring alert is very 
disturbing. We instead are seeing today trumped-up attacks on 
commonsense reforms that need to happen that many people will behind 
closed doors agree need to happen.
  In my particular case with section 3, we have a ``no-action'' letter 
put out by the SEC that those on the other side of the aisle say, ``We 
don't need to do anything. The SEC is taking care of it.'' The problem 
is that it took years for the SEC to even address the issue. Apparently 
what is good enough for a ``no-action'' letter should be good enough 
for the law. So they know full well that many of the things that we are 
trying to address in H.R. 1675 are coming from unintended consequences.
  This important piece of legislation is a package of bipartisan ideas 
designed to help Main Street businesses promote job creation and 
economic growth. The Second District of Michigan, west Michigan, is 
full of these types of family-owned companies.
  Mr. Chairman, small businesses, private companies, and entrepreneurs 
need access to capital, but burdensome, needless regulations out of 
Washington and the SEC have created barriers to that investment 
capital.
  Main Street small businesses are the heart and soul of our Nation. In 
fact, they have created the majority of the Nation's new jobs over the 
last couple of decades. So what does that mean? It is not the big, 
major companies that are creating those job opportunities. It is our 
small, innovative companies that are. For these small businesses to 
survive and thrive in a healthy, growing economy, we must reduce 
barriers to capital and encourage small business growth and the small 
business entrepreneur without putting the taxpayer or the economy at 
risk.
  H.R. 1675 does exactly that. This compilation of bipartisan 
regulatory relief provisions will ensure that Main Street businesses 
continue to have access to the capital that they need to grow the 
economy and create new jobs.
  Mr. Chairman, I urge a ``yes'' vote on H.R. 1675. You need to ignore 
the red herrings that are getting thrown out there. The capital markets 
need to have these reforms. I look forward to working with my Senate 
colleagues to see H.R. 1675 make its way to President Obama's desk for 
his signature.
  Ms. MAXINE WATERS of California. Mr. Chairman, I yield 3 minutes to 
the gentlewoman from Illinois (Ms. Schakowsky), a true progressive 
champion.
  Ms. SCHAKOWSKY. Mr. Chairman, I rise in opposition to H.R. 1675, the 
Encouraging Employee Ownership Act.
  As a young housewife in suburban Chicago, I joined a handful of women 
in a successful campaign to get freshness dates on grocery products. At 
the time, expiration dates were coded. The stores knew, but consumers 
were in the dark about whether the milk they were buying had been on 
the shelf too long.
  Getting that information was really important. It gave us the facts 
and the power to make the right food choices for our families. Getting 
information about our stocks--whether those stocks are in the form of 
compensation or investments--is equally important. Again, information 
is power--the key to being able to protect the financial well-being of 
our families.
  Simply, workers deserve to know the value of the stocks they are 
receiving instead of wages. We are living in a time of serious wage 
stagnation. According to the National Employment Law Project, real 
hourly wages were 4 percent lower on average in 2014 than in 2009. So 
it is important for workers who are offered stock compensation to have 
accurate data about the value of those stocks.
  Similarly, we are experiencing a real retirement security crisis. 
Median savings for all working households is $2,500 for retirement. For 
those near retirement, it is $14,500--not a heck of a lot of money 
saved for retirement. So we need to encourage investments. But if we 
want Americans to invest, we need to give them information. They need 
to be able to judge the risks and make wise decisions.
  Yet, instead of giving American workers or investors more 
information, H.R. 1675 would give them less. This bill would double the 
threshold that triggers disclosure of information to workers. It would 
reduce the requirements for broker-dealers to be accountable for 
certain information that they provide. It would make it harder to find 
information on SEC filings, and it would give the SEC unilateral power 
to overturn congressionally enacted laws to protect investors.
  Those are all really bad ideas, and I think we should vote ``no'' on 
H.R. 1675.

[[Page 1276]]


  Mr. HENSARLING. Mr. Chairman, may I inquire how much time is 
remaining on both sides?
  The CHAIR. The gentleman from Texas has 9 minutes remaining. The 
gentlewoman from California has 9\1/2\ minutes remaining.
  Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from 
Arkansas (Mr. Hill). He is the author of title II of the act.
  Mr. HILL. Mr. Chairman, today I rise in support of H.R. 1675 and 
particularly want to speak about title II, which is called the Fair 
Access to Investment Research Act, which I sponsored along with my 
friend and colleague, Mr. Carney from Delaware.
  Since starting my most recent investment firm that I had back in the 
1990s before I came to Congress a year ago, I have seen the investment 
category exchange-traded funds, or ETFs, grow from about 100 funds with 
$100 billion in assets to over 1,400 funds with almost $2 trillion in 
assets--a significant increase over that time.
  Despite their growing popularity and use by retail investors and 
small institutional investors, most broker-dealers in this country do 
not publish research on ETFs. Primarily, the lack of that publication 
is due to anomalies in the securities laws and regulations, and that is 
at the heart of what we are talking about here. It is an important 
investment category. It deserves research, and it deserves more 
information, not less.
  Title II's mission is simple. It directs the SEC to provide a safe 
harbor for research reports that cover ETFs so that those reports are 
not considered offers under section 5 of the Securities Act of 1933. 
Therefore, ETF research is just treated like all other stock corporate 
research.
  This is a commonsense proposal, and it mirrors other research safe 
harbors implemented by the SEC which clarify the law and allow broker-
dealers to publish ETF research allowing investors more information 
about this rapidly growing and important market.
  Further, this bill holds the SEC accountable--a large challenge 
before the Congress--to follow our direction. This bill requires the 
SEC to finalize the rules within 120 days, and if the deadline is not 
met, an interim safe harbor will take effect until the SEC's rules are 
finalized.
  I might add to my friends at the Commission, this is not a topic 
unfamiliar to you as it has been raised at the Commission many times, 
including by the Commission staff over the past 17 years--and yet no 
action has happened. So we are no longer out ahead of the curve on this 
topic, we are behind it, as there are some 6 million U.S. households 
currently using ETFs in their investment portfolios, and they need 
access to this research.
  Having worked in the banking and investment industry for three 
decades, I appreciate Chairman Hensarling and Congress' efforts to 
promote capital formation, reduce unnecessary barriers, provide 
sunshine, provide information to our investors, and, by definition, 
grow jobs and our economy.
  I want to finally thank Mr. Carney of Delaware for working with me on 
this project and for being so patient along its way in the last weeks.
  Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such 
time as I may consume.
  Mr. Chairman and Members, when my colleague from Massachusetts came 
to the floor and started to talk about this bill, he said this is a bad 
bill, and included in this bill a total of five bad bills.
  As we go through each of these bills, we cannot help but wonder why 
any public policymaker would want to endanger small businesses and 
investors in the way that this bill does. One must ask one's self why, 
why would any elected official want to eliminate financial disclosures 
for employees regarding their stock compensation? Why would you want to 
do that? Why don't you want employees to know what they are being 
given? Why don't you want employees to understand that this stock that 
they are being given may or may not be worth the paper that it is 
written on? Why would we want to keep this information away from them?
  As it was stated by the gentlewoman from Illinois, she said basically 
that many of these companies are not increasing wages. As a matter of 
fact, we have stagnation in wages in this country and in all of the 
major companies, for example. So what is happening is these employees 
believe that when they are being given stock instead of a raise, then 
maybe they have something valuable.
  They need to know what they are getting. They need to know exactly 
what their company is holding out to them is valuable. So I raise the 
question, why would any public policymaker want to keep this 
information from employees?
  Further, the opposite side of the aisle always talks about they are 
for dealing with crime, that they are about criminal justice. But here 
they are allowing bad actors to engage in small business mergers and 
acquisitions. I am talking about people who have been convicted. I am 
talking about people whom you have administrative orders against. I am 
talking about swindlers. I am talking about bad people that will be 
allowed, by this bill, to engage in small business mergers and 
acquisitions. I don't understand it, and I don't know why.
  Increasingly, the people of this country are looking at the Members 
of Congress, and they are saying that they are not with us, they are 
against us, and that we don't have anybody that is really protecting 
our interests. More and more, it is being discussed. They are finally 
getting on to it that somehow too many of the Members of Congress are 
siding with the big guys, siding with the large corporations, and with 
the big banks, and not looking out for the interests of the people. 
They want to know why.
  Again, title III of this bill would significantly expand an exemption 
for registration granted by the SEC to certain mergers and acquisition 
brokers who deal with small businesses without providing significant 
protections for those businesses or investors.
  Last Congress when we considered this exemption, it was meant to 
prompt action by the SEC to finalize its no-action letter to exempt 
these merger and acquisition brokers from registration. Two weeks after 
that bill passed the House floor, the SEC granted relief. Yet you 
wouldn't know it if you read this bill. This bill ignores that relief, 
and, worse, it inexplicably omits eight--omits eight--of the important 
investment protections that it includes.
  As a result, it would allow, again, these bad actors, these cheaters, 
these people who commit fraud, and these scammers to use this exemption 
providing them with an opportunity just to swindle our small 
businesses. Yet they claim they support small business.
  It is fashionable to say, ``I am for small business.'' Everybody is 
for small business. But when you take a look at what we do, you can 
determine who is for the small business and who really are for the big 
businesses, for the swindlers, and for the cheaters who rob small 
businesses of the opportunity to be successful.

                              {time}  1500

  It would also allow M&A brokers to merge public shell companies that 
have no assets of their own.
  Even some of my Republican colleagues who will be offering an 
amendment to add in these two protections are unable to justify the 
omission, but my friends on the opposite side of the aisle completely 
ignore the other six investor protections in the SEC's no action 
relief.
  I am not going to go any further with that. That is quite obvious.
  But let me say this. Not only do we have these bad bills with bad 
public policy, we have a trick in the bill and the bill attempts to tie 
the hands of the SEC by saying they need to go back--oh, back to 1934 
and review everything that they have done, all of these regulations.
  Do you know why they are doing that? It is the same reason that they 
won't support them getting additional funding to do their job. They 
just want to tie their hands so that they won't be able to do the job 
that they are supposed to do.

[[Page 1277]]

  When we call these bills bad, we are simply not sharing with you some 
rhetoric about some meaningless harm that may come because of these 
bills. We are telling you these are harmful bills, these are truly bad 
bills.
  I reserve the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman 
from New Jersey (Mr. Garrett), the chairman of the Capital Markets and 
Government Sponsored Enterprises Subcommittee.
  Mr. GARRETT. Mr. Chairman, I thank the chairman.
  I want to commend Mr. Hultgren, Mr. Hill, and all of the sponsors who 
have worked so hard on the underlying legislation and for the 
dedication to doing what? Improving the capital markets and creating 
jobs in this country.
  Mr. Chairman, the last decade has really not been kind to middle 
class Americans and to lower income Americans as well, where people are 
struggling to make it to the 15th of the month or the end of the month.
  We have not experienced in this country a 3 percent GDP since, I 
think, back in 2005. Middle class income wages are basically 
stagnating, and the number of people in poverty in this country during 
this administration has reached an astonishing 50 million people.
  Did you hear that? Fifty million people during the Obama 
administration find themselves still in poverty right now.
  Yet, the Obama administration continues--if you listen to him and our 
committee meetings from the other side of the aisle, they tout the 
supposed strength of the recovery, despite the fact that, under 
President Obama, only the rich in this country have gotten richer while 
the poor and the middle class continue to struggle.
  Today our committee brings to the floor a package of bills that will 
do what, they will help small businesses. They will help people get new 
jobs. They will help the creation of new hiring. They will help those 
hardworking Americans who want to get a better job and improve 
themselves to create wealth in this country and not just rely, as in 
the past, on taxpayer economic sugar highs provided by the Federal 
Reserve or wasteful stimulus programs.
  What do we have right now? We have five bills. We have Mr. Hultgren's 
legislation that will help hardworking Americans by giving Americans 
more chance to do what? Invest their money so they can work.
  We have Mr. Hurt's legislation initiatives to hold the SEC 
accountable, yes, hold American bureaucrats accountable and reduce 
Washington's unnecessary burdens on small public companies.
  We have Mr. Huizenga's bill to make it easier for small businesses to 
simply receive advice from professionals.
  Finally, we have Mr. Hill's bill over here that will allow investors 
greater access to research on investment funds before they invest their 
money.
  Mr. Chairman, what we have here is that not a single one of these 
provisions will grow the bureaucracy, not a single one of these 
provisions will throw more taxpayer dollars at the situation in the 
hopes that it will solve some perceived problem out there, and not a 
single one of these provisions include any new Federal mandates on the 
job creators of this country: small businesses.
  Each and every one of these is a positive solution to our economic 
problems. As an added bonus, they all have the benefit of being 
bipartisan.
  Again, I thank you and all the sponsors for their support.
  I urge my colleagues to support H.R. 1675.
  Ms. MAXINE WATERS of California. Mr. Chairman, I continue to reserve 
the balance of my time.
  Mr. HENSARLING. Mr. Chairman, how much time is remaining on each 
side?
  The Acting CHAIR (Mr. Byrne). The gentleman from Texas has 3\1/2\ 
minutes remaining. The gentlewoman from California has 3 minutes 
remaining.
  Mr. HENSARLING. Mr. Chairman, I yield 1\1/2\ minutes to the 
gentlewoman from Arizona (Ms. Sinema), one of the Democratic cosponsors 
and cosponsor of title V of the bill.
  Ms. SINEMA. Mr. Chairman, I thank Chairman Hensarling for including 
legislation to review outdated and unnecessary regulation in this 
important bill.
  And thank you to Congressman Hurt for working across the aisle with 
me to advance this commonsense measure.
  Business owners in Arizona regularly tell me that our inefficient and 
often confusing regulatory environment hurts their ability to grow and 
hire. This commonsense legislation requires the SEC to improve and 
repeal outdated regulations, holding them accountable, and providing 
certainty for businesses and consumers in Arizona.
  This bill requires the SEC to within 5 years of enactment and then 
once every 10 years thereafter review all significant SEC rules and 
determine by Commission vote whether they are outmoded, ineffective, 
insufficient, excessively burdensome or are no longer in the public 
interest or consistent with the SEC's mission to protect investors, 
facilitate capital formation, and maintain fair, orderly, and efficient 
markets.
  The Commission would then be required to provide notice and solicit 
public comment on whether such rules should be amended or repealed and 
then amend or repeal any such rule by vote in accordance with the 
Administrative Procedures Act.
  Finally, the Commission would report to Congress within 45 days after 
any final vote, including any suggestions for legislative changes.
  The bill would require the SEC to only review major or significant 
rules. It would not allow mandatory rulemakings to be repealed 
unilaterally by the SEC.
  Should the SEC determine that legislation is necessary to amend or 
repeal a regulation, the bill requires the Commission to include in 
their report to Congress recommendations for such legislation.
  Finally, the bill would prevent additional litigation by clarifying 
that the initial SEC vote would not be subject to judicial review.
  I believe that reviewing significant rules at the SEC, as directed by 
the administration's executive order, is a worthwhile use of SEC 
resources.
  I hope Members join me in supporting this bipartisan legislation.
  I thank Chairman Hensarling and Congressman Hurt for advancing this 
important legislation.
  Ms. MAXINE WATERS of California. Mr. Chairman and Members, I yield 
myself such time as I may consume.
  Since the gentleman from New Jersey talked about the President and 
blamed him for everything he could think of, the administration is 
sending you a message. The administration strongly opposes H.R. 1675.
  ``Among other flaws, this bill includes several provisions that pose 
risks to investors, are overly broad, allow financial institutions to 
avoid appropriate oversight, and are duplicative of existing 
administrative authorities.''
  Thank you from President Obama.
  H.R. 1675 is yet another Republican attempt to deregulate Wall Street 
during the 114th Congress. We have seen time and time again that 
Republicans will stop at nothing to launch attacks at the expense of 
American consumers and taxpayers in order to help the largest Wall 
Street banks. This bill is another example of these tactics.
  So far during this Congress, Republicans on the Financial Services 
Committee have taken a number of measures to undermine consumers, 
undermine investors, and undermine financial stability. Some of the 
worst examples of this include:
  Change in the structure of the Consumer Financial Protection Bureau. 
Ladies and gentlemen, the Republicans hate the Consumer Financial 
Protection Bureau, and they have tried to bog the agency down in 
partisan gridlock and disfunction. Republicans never wanted to create 
the CFPB. Now that it is there and it is successful, they want to 
undercut it.
  Deregulating large banks by removing the enhanced prudential 
standards established by the Dodd-Frank Act. This would allow large 
regional megabanks to escape basic rules related to capital, liquidity, 
and leverage established after the crisis.

[[Page 1278]]

  Allowing discriminatory markups on automobile loans for racial and 
ethnic minority borrowers. Republicans want auto finance companies to 
be able to gouge minority consumers with interest rate markups even 
when those consumers are equally creditworthy compared to their White 
counterparts.
  Removing consumer protections on mortgages for the largest banks. The 
Republicans would remove vital consumer protections from the riskiest 
mortgage products sold by the largest banks in this country.
  The bill also would allow mortgage brokers to get hefty bonuses for 
steering borrowers into expensive and complex mortgage products.
  Eliminating Dodd-Frank protections related to manufactured housing 
loans, thereby allowing consumers to be charged sky-high interest rates 
without providing them guaranteed housing counseling or legal recourse.
  Undermining the Financial Stability Oversight Council. Our 
consolidated regulator in charge of monitoring systemic risk among the 
financial system by doubling the time it would take for them to 
designate risky nonbank companies for extra supervision.
  We should not be surprised about this bill today. It is consistent 
with everything that they have been doing in order to protect Wall 
Street, the biggest banks that are too big to fail. This again is 
consistent with everything they have been doing.
  I yield back the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I yield myself the balance of my time.
  Mr. Chairman, I am very proud of the fact, as the chairman of the 
Financial Services Committee, that we move a lot of bipartisan 
legislation. I take great pride in that. It is just so rare that the 
Democratic ranking member chooses to be a part of any of it.
  Here we have major titles of this bill. Title I supported 45-15 with 
Democratic support; title II passed 48-9 with Democratic support; title 
III, 36-24; title IV, 44-11; title V, 41-16, yet another bipartisan 
exercise where men and women of goodwill come together to try to work 
on behalf of the working families of America. Yet again, the ranking 
member and those who are close to her choose not to be a part of this.
  I guess I would ask, Mr. Chairman, how many more people have to 
suffer in this economy? Working families are struggling. Their 
paychecks are less since the President came to office, since we have 
had 8 years of Obamanomics. They have 10 to 15 percent less in their 
bank accounts. We have tried it their way, Mr. Chairman, and it has 
failed.
  Why does the ranking member and other Democrats continue this war on 
small business? We are losing our small businesses. Entrepreneurship in 
America is at a generational low.
  We are trying to give them a little bit of a bipartisan lifeline to 
breath a little life into these small businesses to allow them to 
create more jobs and better career paths so that so many people don't 
struggle to pay their mortgages and to pay their healthcare premiums.
  These are modest changes. I am glad that a number of Democrats have 
decided to cross the ranking member and want to do something that is 
commonsense that will help small businesses and help the struggling 
working people in America.
  I urge all to vote for the act. I yield back the balance of my time.
  The Acting CHAIR. All time for general debate has expired.
  Pursuant to the rule, the bill shall be considered for amendment 
under the 5-minute rule.
  It shall be in order to consider as an original bill for the purpose 
of amendment under the 5-minute rule an amendment in the nature of a 
substitute consisting of the text of Rules Committee Print 114-43. That 
amendment in the nature of a substitute shall be considered as read.
  The text of the amendment in the nature of a substitute is as 
follows:

                               H.R. 1675

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Capital 
     Markets Improvement Act of 2016''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:
Sec. 1. Short title; table of contents.

                TITLE I--ENCOURAGING EMPLOYEE OWNERSHIP

Sec. 101. Increased threshold for disclosures relating to compensatory 
              benefit plans.

              TITLE II--FAIR ACCESS TO INVESTMENT RESEARCH

Sec. 201. Safe harbor for investment fund research.

 TITLE III--SMALL BUSINESS MERGERS, ACQUISITIONS, SALES, AND BROKERAGE 
                             SIMPLIFICATION

Sec. 301. Registration exemption for merger and acquisition brokers.
Sec. 302. Effective date.

           TITLE IV--SMALL COMPANY DISCLOSURE SIMPLIFICATION

Sec. 401. Exemption from XBRL requirements for emerging growth 
              companies and other smaller companies.
Sec. 402. Analysis by the SEC.
Sec. 403. Report to Congress.
Sec. 404. Definitions.

     TITLE V--STREAMLINING EXCESSIVE AND COSTLY REGULATIONS REVIEW

Sec. 501. Regulatory review.

                TITLE I--ENCOURAGING EMPLOYEE OWNERSHIP

     SEC. 101. INCREASED THRESHOLD FOR DISCLOSURES RELATING TO 
                   COMPENSATORY BENEFIT PLANS.

       Not later than 60 days after the date of the enactment of 
     this Act, the Securities and Exchange Commission shall revise 
     section 230.701(e) of title 17, Code of Federal Regulations, 
     so as to increase from $5,000,000 to $10,000,000 the 
     aggregate sales price or amount of securities sold during any 
     consecutive 12-month period in excess of which the issuer is 
     required under such section to deliver an additional 
     disclosure to investors. The Commission shall index for 
     inflation such aggregate sales price or amount every 5 years 
     to reflect the change in the Consumer Price Index for All 
     Urban Consumers published by the Bureau of Labor Statistics, 
     rounding to the nearest $1,000,000.

              TITLE II--FAIR ACCESS TO INVESTMENT RESEARCH

     SEC. 201. SAFE HARBOR FOR INVESTMENT FUND RESEARCH.

       (a) Expansion of Safe Harbor.--Not later than the end of 
     the 45-day period beginning on the date of enactment of this 
     Act, the Securities and Exchange Commission shall propose, 
     and not later than the end of the 120-day period beginning on 
     such date, the Commission shall adopt, upon such terms, 
     conditions, or requirements as the Commission may determine 
     necessary or appropriate in the public interest, for the 
     protection of investors, and for the promotion of capital 
     formation, revisions to section 230.139 of title 17, Code of 
     Federal Regulations, to provide that a covered investment 
     fund research report--
       (1) shall be deemed, for purposes of sections 2(a)(10) and 
     5(c) of the Securities Act of 1933, not to constitute an 
     offer for sale or an offer to sell a security that is the 
     subject of an offering pursuant to a registration statement 
     that the issuer proposes to file, or has filed, or that is 
     effective, even if the broker or dealer is participating or 
     will participate in the registered offering of the covered 
     investment fund's securities; and
       (2) shall be deemed to satisfy the conditions of subsection 
     (a)(1) or (a)(2) of section 230.139 of title 17, Code of 
     Federal Regulations, or any successor provisions, for 
     purposes of the Commission's rules and regulations under the 
     Federal securities laws and the rules of any self-regulatory 
     organization.
       (b) Implementation of Safe Harbor.--In implementing the 
     safe harbor pursuant to subsection (a), the Commission 
     shall--
       (1) not, in the case of a covered investment fund with a 
     class of securities in substantially continuous distribution, 
     condition the safe harbor on whether the broker's or dealer's 
     publication or distribution of a covered investment fund 
     research report constitutes such broker's or dealer's 
     initiation or reinitiation of research coverage on such 
     covered investment fund or its securities;
       (2) not--
       (A) require the covered investment fund to have been 
     registered as an investment company under the Investment 
     Company Act of 1940 or subject to the reporting requirements 
     of section 13 or 15(d) of the Securities Exchange Act of 1934 
     for any period exceeding twelve months; or
       (B) impose a minimum float provision exceeding that 
     referenced in subsection (a)(1)(i)(A)(1)(i) of section 
     230.139 of title 17, Code of Federal Regulations;
       (3) provide that a self-regulatory organization may not 
     maintain or enforce any rule that would--
       (A) condition the ability of a member to publish or 
     distribute a covered investment fund research report on 
     whether the member is also participating in a registered 
     offering or other distribution of any securities of such 
     covered investment fund;
       (B) condition the ability of a member to participate in a 
     registered offering or other distribution of securities of a 
     covered investment fund on whether the member has published 
     or distributed a covered investment fund research report 
     about such covered investment fund or its securities; or

[[Page 1279]]

       (C) require the filing of a covered investment fund 
     research report with such self-regulatory organization; and
       (4) provide that a covered investment fund research report 
     shall not be subject to sections 24(b) or 34(b) of the 
     Investment Company Act of 1940 or the rules and regulations 
     thereunder.
       (c) Rules of Construction.--Nothing in this section shall 
     be construed as in any way limiting--
       (1) the applicability of the antifraud provisions of the 
     Federal securities laws; or
       (2) the authority of any self-regulatory organization to 
     examine or supervise a member's practices in connection with 
     such member's publication or distribution of a covered 
     investment fund research report for compliance with otherwise 
     applicable provisions of the Federal securities laws or self-
     regulatory organization rules.
       (d) Interim Effectiveness of Safe Harbor.--From and after 
     the 120-day period beginning on the date of enactment of this 
     Act, if the Commission has not met its obligations pursuant 
     to subsection (a) to adopt revisions to section 230.139 of 
     title 17, Code of Federal Regulations, and until such time as 
     the Commission has done so, a covered investment fund 
     research report published or distributed by a broker or 
     dealer after such date shall be deemed to meet the 
     requirements of section 230.139 of title 17, Code of Federal 
     Regulations, and to satisfy the conditions of subsection 
     (a)(1) or (a)(2) thereof for purposes of the Commission's 
     rules and regulations under the Federal securities laws and 
     the rules of any self-regulatory organization, as if revised 
     and implemented in accordance with subsections (a) and (b).
       (e) Definitions.--For purposes of this section:
       (1) Covered investment fund research report.--The term 
     ``covered investment fund research report'' means a research 
     report published or distributed by a broker or dealer about a 
     covered investment fund or any of its securities.
       (2) Covered investment fund.--The term ``covered investment 
     fund'' means--
       (A) an investment company registered under, or that has 
     filed an election to be treated as a business development 
     company under, the Investment Company Act of 1940 and that 
     has filed a registration statement under the Securities Act 
     of 1933 for the public offering of a class of its securities, 
     which registration statement has been declared effective by 
     the Commission; and
       (B) a trust or other person--
       (i) that has a class of securities listed for trading on a 
     national securities exchange;
       (ii) the assets of which consist primarily of commodities, 
     currencies, or derivative instruments that reference 
     commodities or currencies, or interests in the foregoing; and
       (iii) that allows its securities to be purchased or 
     redeemed, subject to conditions or limitations, for a ratable 
     share of its assets.
       (3) Research report.--The term ``research report'' has the 
     meaning given to that term under section 2(a)(3) of the 
     Securities Act of 1933, except that such term shall not 
     include an oral communication.
       (4) Self-regulatory organization.--The term ``self-
     regulatory organization'' has the meaning given to that term 
     under section 3(a)(26) of the Securities Exchange Act of 
     1934.

 TITLE III--SMALL BUSINESS MERGERS, ACQUISITIONS, SALES, AND BROKERAGE 
                             SIMPLIFICATION

     SEC. 301. REGISTRATION EXEMPTION FOR MERGER AND ACQUISITION 
                   BROKERS.

       Section 15(b) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78o(b)) is amended by adding at the end the following:
       ``(13) Registration exemption for merger and acquisition 
     brokers.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an M&A broker shall be exempt from registration under this 
     section.
       ``(B) Excluded activities.--An M&A broker is not exempt 
     from registration under this paragraph if such broker does 
     any of the following:
       ``(i) Directly or indirectly, in connection with the 
     transfer of ownership of an eligible privately held company, 
     receives, holds, transmits, or has custody of the funds or 
     securities to be exchanged by the parties to the transaction.
       ``(ii) Engages on behalf of an issuer in a public offering 
     of any class of securities that is registered, or is required 
     to be registered, with the Commission under section 12 or 
     with respect to which the issuer files, or is required to 
     file, periodic information, documents, and reports under 
     subsection (d).
       ``(C) Rule of construction.--Nothing in this paragraph 
     shall be construed to limit any other authority of the 
     Commission to exempt any person, or any class of persons, 
     from any provision of this title, or from any provision of 
     any rule or regulation thereunder.
       ``(D) Definitions.--In this paragraph:
       ``(i) Control.--The term `control' means the power, 
     directly or indirectly, to direct the management or policies 
     of a company, whether through ownership of securities, by 
     contract, or otherwise. There is a presumption of control for 
     any person who--

       ``(I) is a director, general partner, member or manager of 
     a limited liability company, or officer exercising executive 
     responsibility (or has similar status or functions);
       ``(II) has the right to vote 20 percent or more of a class 
     of voting securities or the power to sell or direct the sale 
     of 20 percent or more of a class of voting securities; or
       ``(III) in the case of a partnership or limited liability 
     company, has the right to receive upon dissolution, or has 
     contributed, 20 percent or more of the capital.

       ``(ii) Eligible privately held company.--The term `eligible 
     privately held company' means a company that meets both of 
     the following conditions:

       ``(I) The company does not have any class of securities 
     registered, or required to be registered, with the Commission 
     under section 12 or with respect to which the company files, 
     or is required to file, periodic information, documents, and 
     reports under subsection (d).
       ``(II) In the fiscal year ending immediately before the 
     fiscal year in which the services of the M&A broker are 
     initially engaged with respect to the securities transaction, 
     the company meets either or both of the following conditions 
     (determined in accordance with the historical financial 
     accounting records of the company):

       ``(aa) The earnings of the company before interest, taxes, 
     depreciation, and amortization are less than $25,000,000.
       ``(bb) The gross revenues of the company are less than 
     $250,000,000.
       ``(iii) M&A broker.--The term `M&A broker' means a broker, 
     and any person associated with a broker, engaged in the 
     business of effecting securities transactions solely in 
     connection with the transfer of ownership of an eligible 
     privately held company, regardless of whether the broker acts 
     on behalf of a seller or buyer, through the purchase, sale, 
     exchange, issuance, repurchase, or redemption of, or a 
     business combination involving, securities or assets of the 
     eligible privately held company, if the broker reasonably 
     believes that--

       ``(I) upon consummation of the transaction, any person 
     acquiring securities or assets of the eligible privately held 
     company, acting alone or in concert, will control and, 
     directly or indirectly, will be active in the management of 
     the eligible privately held company or the business conducted 
     with the assets of the eligible privately held company; and
       ``(II) if any person is offered securities in exchange for 
     securities or assets of the eligible privately held company, 
     such person will, prior to becoming legally bound to 
     consummate the transaction, receive or have reasonable access 
     to the most recent year-end balance sheet, income statement, 
     statement of changes in financial position, and statement of 
     owner's equity of the issuer of the securities offered in 
     exchange, and, if the financial statements of the issuer are 
     audited, the related report of the independent auditor, a 
     balance sheet dated not more than 120 days before the date of 
     the offer, and information pertaining to the management, 
     business, results of operations for the period covered by the 
     foregoing financial statements, and material loss 
     contingencies of the issuer.

       ``(E) Inflation adjustment.--
       ``(i) In general.--On the date that is 5 years after the 
     date of the enactment of the Small Business Mergers, 
     Acquisitions, Sales, and Brokerage Simplification Act of 
     2015, and every 5 years thereafter, each dollar amount in 
     subparagraph (D)(ii)(II) shall be adjusted by--

       ``(I) dividing the annual value of the Employment Cost 
     Index For Wages and Salaries, Private Industry Workers (or 
     any successor index), as published by the Bureau of Labor 
     Statistics, for the calendar year preceding the calendar year 
     in which the adjustment is being made by the annual value of 
     such index (or successor) for the calendar year ending 
     December 31, 2012; and
       ``(II) multiplying such dollar amount by the quotient 
     obtained under subclause (I).

       ``(ii) Rounding.--Each dollar amount determined under 
     clause (i) shall be rounded to the nearest multiple of 
     $100,000.''.

     SEC. 302. EFFECTIVE DATE.

       This title and any amendment made by this title shall take 
     effect on the date that is 90 days after the date of the 
     enactment of this Act.

           TITLE IV--SMALL COMPANY DISCLOSURE SIMPLIFICATION

     SEC. 401. EXEMPTION FROM XBRL REQUIREMENTS FOR EMERGING 
                   GROWTH COMPANIES AND OTHER SMALLER COMPANIES.

       (a) Exemption for Emerging Growth Companies.--Emerging 
     growth companies are exempted from the requirements to use 
     Extensible Business Reporting Language (XBRL) for financial 
     statements and other periodic reporting required to be filed 
     with the Commission under the securities laws. Such companies 
     may elect to use XBRL for such reporting.
       (b) Exemption for Other Smaller Companies.--Issuers with 
     total annual gross revenues of less than $250,000,000 are 
     exempt from the requirements to use XBRL for financial 
     statements and other periodic reporting required to be filed 
     with the Commission under the securities laws. Such issuers 
     may elect to use XBRL for such reporting. An exemption under 
     this subsection shall continue in effect until--
       (1) the date that is five years after the date of enactment 
     of this Act; or
       (2) the date that is two years after a determination by the 
     Commission, by order after conducting the analysis required 
     by section 402, that the benefits of such requirements to 
     such issuers outweigh the costs, but no earlier than three 
     years after enactment of this Act.
       (c) Modifications to Regulations.--Not later than 60 days 
     after the date of enactment of this Act, the Commission shall 
     revise its regulations under parts 229, 230, 232, 239, 240, 
     and 249 of title 17, Code of Federal Regulations, to reflect 
     the exemptions set forth in subsections (a) and (b).

     SEC. 402. ANALYSIS BY THE SEC.

       The Commission shall conduct an analysis of the costs and 
     benefits to issuers described in section 401(b) of the 
     requirements to use XBRL for

[[Page 1280]]

     financial statements and other periodic reporting required to 
     be filed with the Commission under the securities laws. Such 
     analysis shall include an assessment of--
       (1) how such costs and benefits may differ from the costs 
     and benefits identified by the Commission in the order 
     relating to interactive data to improve financial reporting 
     (dated January 30, 2009; 74 Fed. Reg. 6776) because of the 
     size of such issuers;
       (2) the effects on efficiency, competition, capital 
     formation, and financing and on analyst coverage of such 
     issuers (including any such effects resulting from use of 
     XBRL by investors);
       (3) the costs to such issuers of--
       (A) submitting data to the Commission in XBRL;
       (B) posting data on the website of the issuer in XBRL;
       (C) software necessary to prepare, submit, or post data in 
     XBRL; and
       (D) any additional consulting services or filing agent 
     services;
       (4) the benefits to the Commission in terms of improved 
     ability to monitor securities markets, assess the potential 
     outcomes of regulatory alternatives, and enhance investor 
     participation in corporate governance and promote capital 
     formation; and
       (5) the effectiveness of standards in the United States for 
     interactive filing data relative to the standards of 
     international counterparts.

     SEC. 403. REPORT TO CONGRESS.

       Not later than one year after the date of enactment of this 
     Act, the Commission shall provide the Committee on Financial 
     Services of the House of Representatives and the Committee on 
     Banking, Housing, and Urban Affairs of the Senate a report 
     regarding--
       (1) the progress in implementing XBRL reporting within the 
     Commission;
       (2) the use of XBRL data by Commission officials;
       (3) the use of XBRL data by investors;
       (4) the results of the analysis required by section 402; 
     and
       (5) any additional information the Commission considers 
     relevant for increasing transparency, decreasing costs, and 
     increasing efficiency of regulatory filings with the 
     Commission.

     SEC. 404. DEFINITIONS.

       As used in this title, the terms ``Commission'', ``emerging 
     growth company'', ``issuer'', and ``securities laws'' have 
     the meanings given such terms in section 3 of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78c).

     TITLE V--STREAMLINING EXCESSIVE AND COSTLY REGULATIONS REVIEW

     SEC. 501. REGULATORY REVIEW.

       (a) Review and Action.--Not later than 5 years after the 
     date of enactment of this Act, and at least once within each 
     10-year period thereafter, the Securities and Exchange 
     Commission shall--
       (1) review each significant regulation issued by the 
     Commission;
       (2) determine by Commission vote whether each such 
     regulation--
       (A) is outmoded, ineffective, insufficient, or excessively 
     burdensome; or
       (B) is no longer necessary in the public interest or 
     consistent with the Commission's mandate to protect 
     investors, maintain fair, orderly, and efficient markets, and 
     facilitate capital formation;
       (3) provide notice and solicit public comment as to whether 
     a regulation described in subparagraph (A) or (B) of 
     paragraph (2) (as determined by Commission vote pursuant to 
     such paragraph) should be amended to improve or modernize 
     such regulation so that such regulation is in the public 
     interest, or whether such regulation should be repealed; and
       (4) amend or repeal any regulation described in 
     subparagraph (A) or (B) of paragraph (2), as determined by 
     Commission vote pursuant to such paragraph.
       (b) Definition.--As used in this section and for purposes 
     of the review required by subsection (a) the term 
     ``significant regulation'' has the meaning given the term 
     ``major rule'' in section 804(2) of title 5, United States 
     Code.
       (c) Report to Congress.--Not later than 45 days after any 
     final Commission vote described in subsection (a)(2), the 
     Commission shall transmit a report to the Committee on 
     Financial Services of the House of Representatives and the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate describing the Commission's review under subsection 
     (a), its vote or votes, and the actions taken pursuant to 
     paragraph (3) of such subsection. If the Commission 
     determines that legislation is necessary to amend or repeal 
     any regulation described in subparagraph (A) or (B) of 
     subsection (a)(2), the Commission shall include in the report 
     recommendations for such legislation.
       (d) Not Subject to Judicial Review.--Any vote by the 
     Commission made pursuant to subsection (a)(2) shall be final 
     and not subject to judicial review.

  The Acting CHAIR. No amendment to that amendment in the nature of a 
substitute shall be in order except those printed in part A of House 
Report 114-414. Each such amendment may be offered only in the order 
printed in the report, by a Member designated in the report, shall be 
considered read, shall be debatable for the time specified in the 
report, equally divided and controlled by the proponent and an 
opponent, shall not be subject to amendment, and shall not be subject 
to a demand for division of the question.


                       Amendment No. 1 Offered by
                             Mr. DeSaulnier

  The Acting CHAIR. It is now in order to consider amendment No. 1 
printed in part A of House Report 114-414.
  Mr. DeSAULNIER. Mr. Chairman, I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Page 2, after line 17, insert the following:

     SEC. 102. STUDY AND REPORT.

       Not later than 1 year after the date of the enactment of 
     this Act, the Securities and Exchange Commission shall 
     complete a study and submit to Congress a report on the 
     prevalence of employee ownership plans within companies that 
     have a flexible or social benefit component in the articles 
     of incorporation or similar governing documents of such 
     companies, as permitted under applicable State law.

  The Acting CHAIR. Pursuant to House Resolution 595, the gentleman 
from California (Mr. DeSaulnier) and a Member opposed each will control 
5 minutes.
  The Chair recognizes the gentleman from California.

                              {time}  1515

  Mr. DeSAULNIER. Mr. Chairman, this is a straightforward study 
amendment that intends to build on the potential links between 
employee-owned corporations and social benefit corporations. This 
amendment requires the SEC to study overlaps between employee-owned 
corporations and alternative corporate forms authorized under various 
State laws.
  Alternative corporate forms allow corporations, with the consent of 
their shareholders, to pursue social and environmental goals as a for-
profit business enterprise. With legal protections that allow companies 
to consider the interests of all stakeholders, benefit corporations can 
help solve social and environmental challenges through their 
businesses. Benefit corporation status and other corporate forms allow 
companies to differentiate themselves and appeal to all consumers.
  Alternative corporate forms provide legal protections that benefit 
innovators, entrepreneurs, investors, and consumers. These legal 
protections have helped create opportunities for innovation in States 
like California, which currently attracts almost half of all venture 
capital investment in the United States.
  Some of these alternative corporate forms include flexible purpose 
corporations, benefit corporations, and low-profit limited liability 
companies. Benefit corporations, the most common type of alternative 
corporate form, are authorized in 30 States, including in the District 
of Columbia, and are currently being considered in five more States. 
L3Cs are authorized in eight States.
  My amendment simply seeks to improve the availability of data so 
Congress can explore connections between employee-owned corporations 
and these increasingly popular alternative corporate forms.
  Specifically again, this amendment requires the SEC to study and 
report to Congress the prevalence of employee-owned ownership plans 
within corporations that also include a flexible or a social benefit 
component in their articles of incorporation as allowed under relevant 
State laws.
  Mr. Chairman, I urge my colleagues to support this commonsense 
amendment to improve our understanding of employee-owned corporations.
  I reserve the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I rise in opposition to the gentleman's 
amendment.
  The Acting CHAIR. The gentleman from Texas is recognized for 5 
minutes.
  Mr. HENSARLING. Mr. Chairman, I appreciate the gentleman's amendment, 
but I find it somewhat ironic when I continue to hear pleas from the 
other side of the aisle on how terribly burdened the SEC is and what 
great need they have that they can't make due with the resources that 
they have, and then here is a study which would be yet another burden 
on the SEC. First, Mr. Chairman, I find that somewhat ironic.
  I don't find that the gentleman's amendment really has anything to do

[[Page 1281]]

with encouraging employee ownership at privately held companies. I 
guess what really disturbs me, Mr. Chairman, is that this goal or this 
agenda of many is to take disclosure from those items that will enhance 
shareholder value and to, instead, take this into a debate about social 
values.
  We are a very diverse country, and this is a good thing. There may be 
some investors who are interested in companies that support a pro-life 
position, and there may be others who are interested in a company that 
supports a pro-abortion position; but that has very little to do with 
the investment return, which, for most American families, is what they 
care about when they wonder if they are going to be able to pay for 
their home mortgages, to pay their utility bills, or to send their kids 
to college.
  There are some people in America who support the Second Amendment, 
and there are some people who don't. Again, there is a wide diversity 
of social issues, and for those who wish to invest along those lines, 
in a relatively free society, they ought to be able to do that. If they 
can't get the information they need from a corporation, they have a 
multitude of investment opportunities. If they don't feel they are 
getting the type of social value information they need, they have a 
variety of opportunities.
  I feel that the gentleman from California's amendment leads us down a 
road that, I think, ultimately, is harmful to working Americans who are 
trying to invest their meager savings in order to make ends meet. I 
urge that we reject the amendment.
  Mr. Chairman, I reserve the balance of my time.
  Mr. DeSAULNIER. Mr. Chairman, while I respect the gentleman's 
understanding and his years of work in this field, I think my 
experience as a new Member who is coming from a State legislature that 
involved the business community in the development of some of these 
alternative forms, it is merely providing more information for 
shareholders and investors. That is why, when we did it in California, 
we had bipartisan support, including having the support from the 
business community.
  That is the spirit, at least, in which I am offering the amendment. I 
don't think it would be, from a cost-benefit standard, very hard for 
the SEC to provide this information to Congress so that, as these forms 
continue to move throughout the States, we have a better understanding. 
That is the purpose and the spirit of the amendment.
  Mr. Chairman, I yield back the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from California (Mr. DeSaulnier).
  The question was taken; and the Acting Chair announced that the noes 
appeared to have it.
  Mr. DeSAULNIER. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from California 
will be postponed.


          Amendment No. 2 Offered by Mr. Huizenga of Michigan

  The Acting CHAIR. It is now in order to consider amendment No. 2 
printed in part A of House Report 114-414.
  Mr. HUIZENGA of Michigan. Mr. Chairman, I offer an amendment.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Page 9, after line 16, insert the following:
       ``(iii) Engages on behalf of any party in a transaction 
     involving a public shell company.
       ``(C) Disqualifications.--An M&A broker is not exempt from 
     registration under this paragraph if such broker is subject 
     to--
       ``(i) suspension or revocation of registration under 
     paragraph (4);
       ``(ii) a statutory disqualification described in section 
     3(a)(39);
       ``(iii) a disqualification under the rules adopted by the 
     Commission under section 926 of the Investor Protection and 
     Securities Reform Act of 2010 (15 U.S.C. 77d note); or
       ``(iv) a final order described in paragraph (4)(H).''.
       Page 9, line 17, strike ``(C)'' and insert ``(D)''.
       Page 9, line 23, strike ``(D)'' and insert ``(E)''.
       Page 10, line 23, insert ``privately held'' after ``means 
     a''.
       Page 13, beginning on line 6, strike ``year-end balance 
     sheet'' and all that follows through ``report of the 
     independent auditor'' and insert ``fiscal year-end financial 
     statements of the issuer of the securities as customarily 
     prepared by the management of the issuer in the normal course 
     of operations and, if the financial statements of the issuer 
     are audited, reviewed, or compiled, any related statement by 
     the independent accountant''.
       Page 13, after line 20, insert the following:
       ``(iv) Public shell company.--The term `public shell 
     company' is a company that at the time of a transaction with 
     an eligible privately held company--

       ``(I) has any class of securities registered, or required 
     to be registered, with the Commission under section 12 or 
     that is required to file reports pursuant to subsection (d);
       ``(II) has no or nominal operations; and
       ``(III) has--

       ``(aa) no or nominal assets;
       ``(bb) assets consisting solely of cash and cash 
     equivalents; or
       ``(cc) assets consisting of any amount of cash and cash 
     equivalents and nominal other assets.''.
       Page 13, line 21, strike ``(E)'' and insert ``(F)''.
       Page 14, beginning on line 2, strike ``subparagraph 
     (D)(ii)(II)'' and insert ``subparagraph (E)(ii)(II)''.

  The Acting CHAIR. Pursuant to House Resolution 595, the gentleman 
from Michigan (Mr. Huizenga) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from Michigan.
  Mr. HUIZENGA of Michigan. Mr. Chairman, it has been estimated that 
approximately $10 trillion--with a T, 12 zeros--worth of small, 
privately owned, and family-operated businesses will be sold or closed 
in the coming years as baby boomers retire. Mergers and acquisitions 
brokers, or M&A brokers as they are often called, will play a critical 
role in facilitating the transfer of ownership of these small, 
privately held companies.
  If you were here earlier today, you would have heard me issue a red 
herring alert. This is exhibit A, what we are dealing with right now, 
as to what that red herring alert is and as you are hearing from my 
colleagues on the other side of the aisle. This is exhibit A, what I 
used to use as an example of Washington working.
  Last Congress, I had this exact bill, and it passed this body 
unanimously. Let me repeat that--unanimously. There were zero votes 
against it. It went on as a suspension bill. It went on suspension 
because it was noncontroversial. It was agreed that this was the right 
direction to go. Unfortunately, I now have to use this bill and my 
portion--this amendment that we are dealing with--as an example of how 
D.C. is broken, and we wonder why the American people are cynical. 
Let's get to the heart of the matter.
  Why do we need to do this? Why do we need to address this particular 
issue regarding these M&A brokers?
  Today, Federal securities regulations require an M&A broker to be 
registered and regulated by the Securities and Exchange Commission and 
FINRA, just like Wall Street investment bankers who buy and sell 
publicly traded companies. So let's just get this point clear. These 
are not folks on Wall Street. These are folks in Holland, Michigan, in 
Grand Rapids, Michigan, in California, in Texas, in Florida, and 
anywhere else that one is selling a small, family-owned business. That 
is right. Anyone who is dealing with a sale or who is brokering the 
sale of a business anywhere in America is forced to register with the 
Federal Government and be regulated as a securities broker-dealer 
regardless of the size of the business or the sale transaction. This 
red tape is, of course, in addition to the State laws that already 
regulate those transfers.
  How did we get here?
  This bill corrects an unintended consequence of a 1985 Supreme Court 
ruling that overturned a lower court that created the sale of business 
doctrine. Prior to that decision, private company sales were exempted 
from Federal regulation. Since 1985, the SEC has issued many 
nonaction--or no action--letters that, under various but differing 
factual circumstances, have

[[Page 1282]]

granted relief for M&A brokers. However, the other side is not willing 
to actually put it into law.
  Let's be clear. Title III of H.R. 1675 does not do away and does not 
change in any way, affect, or limit the SEC's jurisdiction or powers to 
investigate and enforce Federal securities laws. Rather, it simply 
exempts M&A brokers from SEC registration as broker-dealers, which 
makes the transfer of these small, family-owned businesses affordable. 
In fact, what do you do when you own a small family business? I own 
one. If I am able to save money on one side, I am able to invest it 
into my employees, and I am able to invest it into the equipment that 
is in my business.
  Federal securities regulation is primarily designed to protect 
passive investors in public security markets. Passive investors are 
people like you and me who might just buy a share in a company 
somewhere. Privately negotiated M&A transactions are vastly different 
and benefit little from SEC and FINRA registration and regulation but 
are burdened by the same regulatory requirements, obligations, and 
associated costs. M&A brokers, themselves, are small businesses.
  Title III of H.R. 1675 includes my bipartisan legislation, H.R. 686, 
the Small Business Mergers, Acquisitions, Sales, and Brokerage 
Simplification Act, which would create a simplified system for brokers 
facilitating the transfer of ownership of small, privately held 
companies. Yes, it was a bipartisan bill that passed our committee.
  My amendment would further clarify two things:
  First, any broker or associated person who is subject to suspension 
or revocation of registration is disqualified from the exemption. In 
other words, if you are a bad actor, you are exempted. You are not 
allowed to take part in this;
  Second is the inapplicability of the exemption to any M&A transaction 
where one party or more is a shell company. We heard that being brought 
up as a reason we shouldn't be doing this. Again, we offer an 
exemption. If there is a shell company, that is not allowed to be used.
  By including these additional investor protections--let me repeat, 
``additional''--this amendment strikes an appropriate balance between 
the legitimate interests of all stakeholders and maintains strong 
protections for investors and small businesses.
  Today, Mr. Chairman, I just hope that we will see some common sense, 
that we will not chase after the red herrings that are being thrown out 
there, and that we will support H.R. 1675.
  I yield back the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Chairman, I rise in opposition 
to the amendment even though I am not opposed to the amendment.
  The Acting CHAIR. Without objection, the gentlewoman from California 
is recognized for 5 minutes.
  There was no objection.
  Ms. MAXINE WATERS of California. Mr. Chairman, I would like to thank 
Mr. Huizenga for addressing one of the many glaring problems with this 
bill.
  Title III of this bill significantly expands an exemption granted by 
the SEC to certain brokers but without providing the significant 
protections the SEC deemed important for small businesses or investors.
  This amendment would prevent people who have committed fraud and 
securities violations--individuals who couldn't sell used stock but who 
could sell your small business in the underlying bill--from claiming 
this exemption.
  However, why does the amendment limit the bad actor provision to just 
this title? Why not make it explicit that persons and companies that 
have committed fraud are not eligible to take advantage of any of the 
exemptions provided in this act?
  I also appreciate that the amendment prevents public shell companies 
from taking advantage of this title, which would otherwise allow 
private companies to circumvent important public company disclosure 
requirements.
  Mr. Chairman, I would like to know why the author completely ignores 
the other six investor protections in the SEC's no action relief. I am 
not aware of any witness before our committee who explained how these 
other investor protections were burdensome. Indeed, they seemed like 
commonsense protections.
  For example, the SEC required merger and acquisition brokers who 
represent both parties of the transaction to obtain the consent of both 
parties to that conflict of interest. Similarly, the SEC prohibited M&A 
brokers from engaging in private placements and arranging buyer 
financing because the narrow exemption from registration is intended 
for persons who fairly facilitate the merger of small businesses, not 
for the promoters who are compensated for their ability to hype up the 
value of the companies and attract new investment.

                              {time}  1530

  If Republicans truly wanted to codify the SEC's administrative action 
to provide legal certainty for these brokers, then they should have 
accepted the Democratic amendment adding back in these protections. But 
that isn't the point of this bill, and this amendment is just a sleight 
of hand that all is well.
  Let me just mention here that registered broker-dealers are subject 
to a variety of regulatory requirements that nonbroker-dealer M&A 
advisers are not, including, without limitation, regarding antimoney 
laundering, privacy of customer information, supervisory reporting and 
recordkeeping requirements, inspections by the SEC and SRO, such as 
FINRA, supervision and regulation of employees' trading and outside 
business activities, insider trading, and regulations governing 
interactions between a broker-dealer's investment banking and research 
departments.
  H.R. 686 risks promoting lower standards and less rigor and 
regulatory oversight in the providing of this important advice.
  It is worthy to add that SIFMA is opposed to the amendment.
  I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from Michigan (Mr. Huizenga).
  The amendment was agreed to.


                 Amendment No. 3 Offered by Mr. Sherman

  The Acting CHAIR. It is now in order to consider amendment No. 3 
printed in part A of House Report 114-414.
  Mr. SHERMAN. Mr. Chairman, I offer my amendment.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Page 9, after line 16, insert the following:
       ``(C) Disqualification for certain conduct.--An M&A broker 
     may not make use of the exemption under this paragraph if the 
     broker--
       ``(i) has been barred from association with a broker or 
     dealer by the Commission, any State, or any self-regulatory 
     organization; or
       ``(ii) is suspended from association with a broker or 
     dealer.
       ``(D) Transactions involving shell companies prohibited.--
       ``(i) In general.--An M&A broker making use of the 
     exemption under this paragraph may not engage in a 
     transaction involving a shell company, other than a business 
     combination related shell company.
       ``(ii) Shell company defined.--In this subparagraph, the 
     term `shell company' means a company that--

       ``(I) has no or nominal operations; and
       ``(II) has--

       ``(aa) no or nominal assets;
       ``(bb) assets consisting solely of cash and cash 
     equivalents; or
       ``(cc) assets consisting of any amount of cash and cash 
     equivalents and nominal other assets.
       ``(iii) Business combination related shell company 
     defined.--In this subparagraph, the term `business 
     combination related shell company' means a shell company that 
     is formed by an entity that is not a shell company solely for 
     the purpose of--

       ``(I) changing the corporate domicile of such entity solely 
     within the United States; or
       ``(II) completing a business combination transaction (as 
     defined in section 230.165(f) of title 17, Code of Federal 
     Regulations) among one or more entities other than the shell 
     company, none of which is a shell company.

       ``(E) Financing by m&a brokers prohibited.--An M&A broker 
     may not provide financing, either directly or indirectly, 
     related to the transfer of ownership of an eligible privately 
     held company.
       ``(F) Disclosure and consent.--To the extent an M&A broker 
     represents both buyers

[[Page 1283]]

     and sellers of an eligible privately held company, the broker 
     shall provide clear written disclosure as to the parties the 
     broker represents and obtain written consent from all parties 
     to the joint representation.
       ``(G) Passive buyers prohibited.--An M&A broker may not 
     engage in a transaction involving the transfer of ownership 
     of an eligible privately held company to a passive buyer or 
     group of passive buyers.
       ``(H) No authority to bind party to transfer.--The M&A 
     broker may not bind a party to a transfer of ownership of an 
     eligible privately held company.
       ``(I) Restricted securities.--Any securities purchased or 
     received by the buyer or M&A broker in connection with the 
     transfer of ownership of an eligible privately held company 
     are restricted securities (as defined in section 
     230.144(a)(3) of title 17, Code of Federal Regulations).
       Page 10, line 8, insert ``, and'' after ``officer''.
       Page 10, beginning on line 11, strike ``20 percent'' and 
     insert ``25 percent''.
       Page 10, line 14, strike ``20 percent'' and insert ``25 
     percent''.
       Page 10, line 19, strike ``20 percent'' and insert ``25 
     percent''.
       Page 12, beginning on line 19, strike ``will be active in 
     the management of'' and insert ``will actively operate''.

  The Acting CHAIR. Pursuant to House Resolution 595, the gentleman 
from California (Mr. Sherman) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from California.
  Mr. SHERMAN. Mr. Chairman, there may be some acrimony on the floor 
from time to time, but I think we are mostly in agreement.
  The SEC, under some tutelage from the committee, in January of 2014 
issued its no-action letter providing that, in certain circumstances, a 
small business merger or acquisitions broker would not have to 
register. They issued this in January of 2014.
  The gentleman from Michigan brought forward a good bill designed to 
codify that decision by the SEC, but he did not in his codification 
include six of the limitations that the SEC had in its no-action 
letter.
  Now he has brought forward and I think we just adopted an amendment 
to add to his bill the two most important limitations that the SEC had 
in its no-action letter.
  It excludes from the exemption those who have been bad actors in the 
past and barred from association with broker-dealers, and it excludes 
shell companies.
  As far as it goes, I think that is a good amendment. I am glad we 
adopted it.
  But if we are going to deal with this area with statute, we should 
take a look at the other exclusions from the exemption that the SEC 
included in its no-action letter.
  The amendment that is before us today is the same amendment I offered 
in committee. It does everything that the gentleman from Michigan's 
amendment does and takes the additional exclusions that the SEC had in 
its no-action letter.
  The most important of these is to require that, to be eligible, a 
broker would have to disclose to both parties and get consent from both 
parties if they are getting paid by both parties.
  So if you are getting a seller's commission and a buyer's commission, 
you would tell the buyer and the seller that that is the case. This 
amendment would add that as a requirement for the exemption.
  We would also have, as the SEC had in its no-action letter, an 
exclusion where there are passive buyers. So this is the amendment I 
offered in committee. It includes the amendment that we just adopted. 
It includes the other exclusions from the exemption that the SEC 
adopted.
  None of the SEC's exclusions from its exemption have been 
controversial. So I would like to go beyond the gentleman from 
Michigan's amendment and include all of those exclusions from the 
exemption.
  I reserve the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I claim the time in opposition.
  The Acting CHAIR. The gentleman from Texas is recognized for 5 
minutes.
  Mr. HENSARLING. Mr. Chairman, I do appreciate the gentleman from 
California's amendment. I think there are a lot of well-thought ideas 
here. I appreciate the sentiment by which he approached the amendment.
  I do believe, though, that, in this particular case, this amendment 
goes a little bit too far in the wrong direction and ultimately can 
prove to hurt a number of small businesses and economic growth.
  Number one, a lot of what the gentleman is trying to achieve I think 
has already been achieved in the amendment by the gentleman from 
Michigan that we just approved on voice vote here on the floor.
  I would also add that, with the amendment from the gentleman from 
Michigan, who has the underlying title of this bill, the language now 
is identical to the bipartisan Senate language.
  We know how difficult it is to get laws passed. I think it is 
important, where we can, to align the language with the other side of 
the Capitol. I think this could ease passage of a bill which is 
bipartisan, again, on both ends of the Capitol.
  Again, I appreciate what the gentleman from California is trying to 
do, but I think that the gentleman from Michigan strikes the 
appropriate balance.
  Mr. SHERMAN. Will the gentleman yield?
  Mr. HENSARLING. I yield to the gentleman from California.
  Mr. SHERMAN. Mr. Chair, there might be some advantage to having 
language identical to the Senate, if the bill was identical to a Senate 
bill.
  In this case, this title is being added to five other titles. In the 
committee, we dealt with it as six separate bills. Here on the floor, 
it is one bill. So there is no particular advantage to conforming to 
the Senate.
  If the Senate language does not exclude from the exemption those 
brokers that fail to disclose that they are representing both sides, 
then that proves the additional wisdom----
  Mr. HENSARLING. Mr. Chairman, reclaiming my time. I appreciate the 
gentleman's pushback, but I am still not going to quite see things his 
way.
  I believe that the gentleman from Michigan strikes the proper balance 
here, particularly at a time when, again, our working families are 
struggling and this economy is limping along. We had a fourth-quarter 
GDP report where this economy was barely on life support systems.
  We have to jump-start our small businesses. We have to jump-start 
capital formation. The gentleman from Michigan has the right balance.
  I reserve the balance of my time.
  Mr. SHERMAN. Mr. Chairman, we have tough economic conditions out in 
our country. We need more jobs. We need business to operate smoothly.
  How many jobs do we create by telling merger and acquisition brokers 
that they can get fees from the seller and get fees from the buyer and 
not tell either party that they are getting paid by both parties?
  That is not an essential element. That failure to disclose is not an 
essential element of rejuvenating the American economy.
  This bill is not identical to the Senate bill because this bill has 
six titles. The Senate bill has one title.
  Here is a chance for the House to show its superior wisdom to include 
language that neither the author of the bill nor the chairman of the 
committee argues against in substance to add language that says that, 
if you want to enjoy this exemption, you have to tell both parties that 
you are being paid by both parties if, indeed, you are being paid by 
both parties.
  So this additional disclosure requirement is good on the merits. It 
does nothing to delay the adoption of the additional legislation. I am 
confident that a rejuvenation of our economy does not require that we 
conceal from those who are buying and selling businesses the fact that 
their broker is getting paid by both sides. Let's provide for full 
disclosure. Let's revitalize the economy.
  I yield back the balance of my time.
  Mr. HENSARLING. Mr. Chairman, I yield the balance of my time to the 
gentleman from Michigan (Mr. Huizenga).
  Mr. HUIZENGA of Michigan. Mr. Chairman, I appreciate the efforts of

[[Page 1284]]

my colleague from California. We have worked well on a number of these 
issues.
  I would point out, though, that maybe not you, but some others are 
trying to act like this is the monumental thing whereas mergers and 
acquisitions are going to fail or flounder whether your amendment is 
passed.
  While it may be of some interest and I think it has some things that 
are either benign or not terribly objectionable, we do know--and I 
think we probably would both jointly agree--that oftentimes our problem 
isn't between us. It is between trying to get this body and the Senate 
to agree. If we can have one less thing to have a disagreement with 
them on as we are advancing this, I am all for it.
  I will specifically say subsection (C) on page 1, as you are talking 
about, my amendment adds what you have in there and more bad actor 
disqualifications. Actually, your amendment would roll that back. I 
don't think that was your intention, but that is what it would do.
  In subsection (D), our amendment adds the same disqualification, but 
is shorter and simpler to understand, which is also important as we are 
dealing with the Senate.
  In subsection (E), there is no apparent reason to prevent private 
business sellers and buyers from getting a transaction fee from a bank 
that is affiliated with an M&A broker. There shouldn't be some sort of 
exclusion on that.
  In subsection (F), it is highly, highly unusual that an M&A broker 
would work for both the seller and the buyer in the same transaction. 
So I think this is maybe a section in search of a problem.
  Subsection (G), adding this prohibition is frankly redundant, in our 
view, and could cause some more confusion.
  In subsection (H), the reasonable belief element sort of does the 
same thing. I am not sure what we are trying to get at other than maybe 
causing some more confusion. It is not, again, an intention of that but 
is what it would do.
  Subsection (I) is simply restating the existing law.
  So I think, as we are going through this, we are not wildly out of 
disagreement. I just believe that the amendment that was offered and 
passed earlier, which puts us in line, again, with the efforts of the 
Senate, is a better way to go.
  Again, to my friend from California, this is not you that I will 
direct this at, but others on your side of the aisle who are pointing 
to the no-action letter as the reason why we don't have to do this 
legislation.
  Yet, now we are saying we have to pass your amendment because it is 
only a no-action letter and we need this into the law. So we can't have 
it both ways.
  Mr. HENSARLING. Mr. Chairman, I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from California (Mr. Sherman).
  The amendment was rejected.
  The Acting CHAIR. The Committee will rise informally.
  The Speaker pro tempore (Mr. Thornberry) assumed the chair.

                          ____________________